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ACI NEWS
ACI has called on the Australian Securities and Investments
Commission (ASIC) to clarify and expand several require-
ments in proposed guidelines for Australian Financial Services
(AFS) licensees to ensure they are complying with their risk
management obligations.
While generally supporting most of the issues outlined
in Consultation Paper 204: Risk Management Systems of
Responsible Entities, ACI believes there are some areas such as
stress testing; what constitutes an independent risk review of the
risk management system; and the relatively short timefra me for
implementation, that need to be taken on board.
ASIC sets out in its discussion paper that Australia's managed
funds sector (outside superannuation assets management) has 500
responsible entities operating about 4,000 registered, investment
schemes, collectively managing $513 billion of assets, ranging
from infrastructure to fixed-interest products, mortgages, real
property, cash and private equity.
However, there is no industr y-specific guidance available for
risk management systems to help them better manage the risks
they face, both as responsible entities and the scheme(s) they
operate.
It is intended that new guidelines be applied by these entities
according to the nature, scale and complexity of their operations
so that investor and financial consumer confidence is assured
through mitigating exposure to relevant risks. The guidelines are
also intended to build confidence in the integrity of Australia's
capital markets by better safeguarding the financial services
industry from systemic risk.
ACI's key issues with the proposals are:
• How ASIC will approach the implementation of the
guidance in respect to style. There needs to be consistency
of approach with the Australian Prudential Regulatory
Authority's (APR A's) guidance material
• Clarifcation around the annual review of the risk
management system to ensure it is actually a review of the
Risk Management Strategy or framework
• A quarterly review of risk management systems. ACI
suggests an annual review or reviews if there is a significant
change occurring to the entity or scheme's business
operations structure, as APRA does
• Expectations set about what constitutes an annual review
• The need for more guidance around stress testing
• The short timeframe for implementation of risk management
system s in responsible entities.
Full details are available on ACI's website under the
'submissions' menu item.
Managed funds to get risk
management guidance